IMF Executive Board Concludes Annual Discussions on CEMAC Countries’ Common Policies

Growth is projected to be 1.9 percent in 2016, as oil production and investment remain sluggish

On July 13, 2016, the Executive Board of the International Monetary Fund (IMF) concluded the annual discussions on Common Policies and Challenges of Member Countries with the Central African Economic and Monetary Community (CEMAC).[1]

CEMAC growth was subdued in 2015. It slowed to 1.6 percent, from 4.9 percent in 2014, because of reduced public investment and lower oil production. Growth is projected to be 1.9 percent in 2016, as oil production and investment remain sluggish. From 2017 onward, growth is expected to reach 3½ percent a year, as oil prices gradually recover, some one percentage point below the average growth level of the past decade of high oil prices. Growth of money and credit to the economy turned negative in 2015 for the first time in a decade, contributing to keeping inflation low. The regional fiscal and current account deficits grew to 6 and 9 percent of GDP in 2015, respectively, as oil export proceeds fell by 32 percent. Continued low oil prices and high public expenditure will contribute to maintaining both deficits at about 6 and 8 percent of GDP in 2016, respectively. The gradual recovery in oil prices and the expected moderate fiscal consolidation should narrow the regional fiscal and current account deficits to 3 percent by 2021. Reserves have declined. Banks appear to have weathered the economic downturn thus far.

Policies to counter the oil-price shock need to focus on fiscal consolidation and real-economy reforms. In the wake of the oil-price shock, monetary financing has been the primary response tool. Although the non-oil primary deficit dropped by 8 percentage points of GDP in 2015, this response has been insufficient to check the overall fiscal deficit. Fiscal policy coordination among members should be strengthened and fiscal discipline enforcement is needed. Real-economy reforms, focusing on improving the business climate and boosting private investment, are also needed to preserve macroeconomic stability.

CEMAC medium-term prospects are challenging. A weaker-than-expected oil price recovery or a relapse in security conditions in the Lake Chad region could undermine macroeconomic stability and private investment. Lower growth in China could dampen commodity prices—especially oil—, lower demand, and reduce financing. In these challenging times, stronger regional institutions are necessary for promoting regional integration and supporting regional economic growth.

Executive Board Assessment2

Executive Directors expressed concern about the region’s deteriorating economic prospects stemming from multiple shocks, in particular the oil price decline, the challenging security environment, and the insufficient policy response. With the medium-term outlook facing considerable risks, Directors strongly encouraged the authorities to take timely and decisive actions to pursue fiscal adjustment and ensure debt and external sustainability, rebuild foreign reserves buffers, and implement region-wide structural reforms to diversify the economy and improve investment prospects. Stronger regional institutions are also essential to improving regional integration and policy coherence and compliance. Directors also called for enhanced support from the Fund and other international partners to help the authorities address the current economic difficulties.

Directors stressed the critical importance of continued fiscal consolidation to address the widening fiscal and current account deficits and to maintain macroeconomic stability. While welcoming the recent progress, they encouraged further efforts to expand the non-oil tax base and rationalize and improve the quality of spending to maximize economic returns and social protection. Directors welcomed the authorities’ intention to pursue prudent borrowing and debt management policies, and encouraged borrowing on concessional terms to the extent possible. Directors also welcomed the new regional convergence framework, although a lower debt ceiling and stronger monitoring mechanisms should be considered.

While acknowledging the supportive role played by the accommodative monetary stance in weathering shocks, Directors noted the limited scope for further monetary policy easing and called for greater prudence in this regard. They urged the authorities to freeze the statutory advances to national governments, avoid indirect monetary financing, and accelerate reforms to the monetary policy framework to improve its effectiveness, including greater central bank independence. Directors underscored that rebuilding the low level of reserves is an urgent priority, and that better pooling of reserves across the members remains important. They encouraged the implementation of the remaining safeguards assessment recommendations.

Directors noted the resilience of the financial sector, and encouraged the development of a sound macroprudential framework to safeguard financial stability in the region. Directors also welcomed the progress made following the 2015 FSAP recommendations, and urged the implementation of the remaining recommendations, as well as measures to broaden financial inclusion and strengthen the AML/CFT framework.

Directors stressed the need for ambitious structural reforms to boost competitiveness and diversification, create private-sector investment opportunities, and improve the business environment. They encouraged the strengthening of regional institutions to enhance collaboration and macroeconomic management.

The views expressed by Directors today will form part of the Article IV consultation discussions on individual members of the CEMAC that take place until the next Board discussion of CEMAC common policies.

CEMAC: Selected Economic and Financial Indicators, 2012–17
2012 2013 2014 2015 2016 2017
Estim. Proj. Proj.
(Annual percent change)
National income and prices
GDP at constant prices 5.4 2.1 4.9 1.6 1.9 3.3
Oil GDP -0.3 -8.0 3.0 -0.4 -1.5 0.2
Non-oil GDP 5.9 4.6 5.0 2.6 2.7 4.1
Consumer prices (period average)1 3.9 2.1 2.7 2.3 2.0 2.7
Consumer prices (end of period)1 3.2 2.4 2.6 1.6 2.7 2.4
(Annual changes in percent of beginning-of-period broad money)
Money and credit
Net foreign assets 9.5 -0.4 -7.6 -17.7 -8.5 -3.9
Net domestic assets 6.7 9.0 14.9 15.6 12.1 11.2
Broad money 16.6 6.7 9.4 -2.2 3.6 7.4
(Percent of GDP, unless otherwise indicated)
Gross national savings 30.8 26.5 27.1 20.2 21.1 20.0
Gross domestic investment 30.1 31.4 32.7 29.7 28.8 25.1
Of which: public investment 14.0 14.5 14.3 10.7 9.8 7.9
Government financial operations
Total revenue, excluding grants 27.6 26.8 25.0 20.2 19.0 18.8
Government expenditure 29.2 30.3 29.6 26.6 25.9 23.8
Primary fiscal basic balance2 -0.6 -1.6 -2.5 -4.4 -2.9 -1.2
Basic fiscal balance 3 -1.3 -2.2 -3.1 -5.2 -4.1 -2.4
Overall fiscal balance, excluding grants -1.6 -3.5 -4.6 -6.4 -6.8 -5.0
Primary fiscal balance, including grants -0.3 -2.3 -3.3 -5.0 -4.7 -3.0
Non-oil overall fiscal balance, excluding grants4 -31.0 -29.1 -25.9 -18.0 -15.9 -13.6
Non-oil primary fiscal balance, including grants 4 -28.9 -27.3 -24.0 -16.3 -13.4 -11.2
External sector
Exports of goods and nonfactor services 57.0 53.7 50.8 41.5 36.3 37.0
Imports of goods and nonfactor services 42.4 41.0 43.0 42.3 36.9 34.8
Balance on goods and nonfactor services 14.6 12.7 7.9 -0.8 -0.6 2.2
Current account, including grants 2.9 -0.8 -3.3 -9.4 -7.7 -5.2
External public debt 13.1 15.5 18.5 23.4 25.6 25.8
Gross official reserves (end of period)
Millions of U.S. dollars 17,531 18,222 15,309 10,139 7,866 7,634
Months of  imports of goods and services
(less intra-regional imports)
5.7 5.6 6.1 4.6 3.4 3.3
Percent of broad money 88.7 83.7 64.3 52.0 38.5 34.5
Memorandum items:
Nominal GDP (billions of CFA francs) 45,877 45,572 46,702 43,369 43,423 47,019
CFA francs per U.S. dollar, average 511 494 494 591
Oil prices (US dollars per barrel) 105.0 104 96 51 44 51
Source: Authorities’ data; and IMF staff estimates and projections.
1 Using as weights the shares of member countries in CEMAC’s GDP in purchasing power parity in US dollars.
2 Excluding grants and foreign-financed investment and interest payments.
3 Excluding grants and foreign-financed investment.
4 In percent of non-oil GDP.

[1] Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. In the context of these bilateral Article IV consultation discussion, staff hold separate annual discussions with the regional institutions responsible for common policies in four currency unions – the Euro Area, the Eastern Caribbean Currency Union, the Central African Economic and Monetary Union, and the West African Economic and Monetary Union. For each of the currency unions, staff teams visit the regional institutions responsible for common policies in the currency union, collects economic and financial information, and discusses with officials the currency union’s economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis of discussion by the Executive Board. Both staff’s discussions with the regional institutions and the Board discussion of the annual staff report will be considered an integral part of the Article IV consultation with each member.

2At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the regional authorities. An explanation of any qualifiers used in summing ups can be found here:

Source: International Monetary Fund (IMF).

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